Google Q1 profits climb

Google’s revenue and net income rose in the first quarter, ended March 31, 2006.

by
Juan Carlos Perez
, | 21 Apr 06

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Google’s revenue and net income rose in the first quarter, ended March 31, 2006, thanks to continued increases in the usage of its search engine services and online advertising sales.

Revenue came in at $2.25 billion, a 79 per cent increase compared with 2005's first quarter. Excluding the commissions Google pays to websites in its ad network, revenue was $1.53 billion, exceeding the $1.44 billion consensus expectation from analysts.

Net income reached $592.3 million, or $1.95 per share, up from $369.2 million, or $1.29 per share. On a pro forma basis, which excludes certain one-time items, net income was $697 million, or $2.29 per share, exceeding analysts' consensus $1.97 per share.

The positive results contrast with the disappointment of its fourth quarter, when Google missed analysts expectations by $0.22 and the company's stock got hammered in after-hours trading.

Good news across the board

Google executives said in a conference call that the strong sales and usage of its services were due in large part to the company's continued investments in its infrastructure and on technology development.

"We have good news across the board, across the whole business. We've made a lot of progress on what we consider to be our highest strategic priority, both search quality and end user traffic, and it looks to us like we continue to gain market share," said Google CEO Eric Schmidt.

As usage of Google's services increases, more advertisers are drawn to the growing audience the company is able to provide, Schmidt said. Now, Google is hard at work at delivering its services to mobile devices, a new frontier for internet access, and Google is actively securing partnerships with mobile service providers, Schmidt said.

China’s growth market

Schmidt also touched on the sensitive topic of China, where Google has agreed to provide a censored version of its search engine and been criticised for that by human rights and free speech advocates. The size of the Chinese market makes it a key business for Google, which plans to go all out for it with its local presence there and a research and development centre, he said.

As Google continues to provide portal-like features like its Google Finance site, yet resist the portal label, Google co-founder and president of products Larry Page said the question of whether or not Google is becoming a portal is irrelevant. "We really don't think about it that way. We're trying hard to find user needs that aren't being met at all," Page said.

Meanwhile, the other co-founder, Sergey Brin, president of technology, said Google is intensely interested in partnering with PC makers for deals such as the one it has with Dell to have Google software and services pre-loaded on machines.

Asked about Google's philosophy towards providing display ads, such as banners, which it has largely avoided to date, Page said Google is very open to expanding into that area, even if those types of ads generally aren't a good fit for its web search engine results pages. However, those ads could go well in other Google websites, such as its video search site and in third-party sites in its ad network, Page said. Most Google ads are paid search text ads.